Tegel to be helped to 'full potential', buyer says

Singapore-based Claris Investments Pte says it wants to help New Zealand poultry producer Tegel Foods Ltd "reach its full potential".

Claris is owned by three partnerships associated with Affinity Equity Partners, the private equity firm behind troubled clothing and footwear retailer Colorado Group. Colorado was put in receivership yesterday.

The Affinity Equity partnerships which make up Claris have won Overseas Investment Office approval of their acquisition of Tegel parent company NZ Poultry Enterprises Ltd (NZPEL) for a reported $600 million.

Tegel employs about 1550 workers.

Pacific Equity Partners bought Tegel from HJ Heinz six years ago for $250m, after Tegel lost New Zealand's biggest chicken contract - to supply KFC fast food outlets - and its sales fell. Chicago-based Heinz originally bought the Tegel business in 1992 as part of its purchase of Goodman Fielder but sold it in a bid to quit underperforming businesses outside the United States.

Pacific Equity still retains a 43 percent stake but the rest of Tegel's parent company is owned by Tegel management (14 percent), ANZ Entities (30 percent), Lujeta Pty Ltd in Australia, and British-based Intermediate Capital Group.

Claris Investments said it "aims to assist Tegel to reach it full potential through further expansion, including Tegel's product range".

NZPEL reported a tax paid profit of $22.6m for the year to Anzac Day, 2010, on revenue of $401.7m but has interest-bearing debt of $319.2m.

Affinity's purchase is expected to be backed by Commonwealth Bank of Australia, Westpac, Macquarie Bank and Rabobank, which will replace the $300m in borrowings in place with BOS International, ANZ, Rabobank and Westpac.

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3 Comments & Questions

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Full potential to what ?
Screw the investor when they suck Tegal dry and then try to onsell in a public float.
I have had enough of these private equity crooks
White collar crime at its best

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Well put Anonymous - but first the Private Equity firm will use their market power to increase the price of chicken to ramp up short term earnings - and then IPO it and we poor investors will find that the quality and sustainability of the earnings doesnt exist. Private Equity firms are generally run by people that have had little experience in commercial environments, but do understand short term market volatiliy. Watch chicken prices in NZ rise - could make lamb in the supermarket look cheap soon. Hopefully the Commerce Commission will look into this one early, not once the legal walls of the castle are built to hide the likely abuse of market position.

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Private equity should just go back to its old name of leveraged buyout. Stop trying to con the public. All these people do is leverage up the balance sheet of lowly geared companies ,have a short term view to grow earnings at all costs employees included and then I.P.O to us suckers the public. We all know waht happens when it goes wrong. Greedy bankers and directors.

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